You may think you know everything about a potential new business, but if you’re looking for finance, or support services, you may need to be able to prove it. Creating a business plan will help you show potential partners that you have a comprehensive and sustainable strategy for making your business work.

Building a plan can also work in your favour. Setting down your ideas and plans on paper – or, more likely nowadays, on a computer screen – can help you focus on the key issues you need to consider. It will highlight any potential weaknesses and show you areas you need to work on. This means the purpose of your plan should be twofold – firstly to show to any potential investor, lender or service provider, and reassure them that you are a serious, viable business; and secondly to provide a template for the direction of your business.

So what should a business plan contain? Experts’ views vary, but there are some core areas that must be included:

• Cashflow. Businesses run on income, so you need to set down what monies you expect to come in, and what expenditure you’re likely to incur;
• Profit and loss. If you’re a new business, you’ll need to estimate what profit you expect to make over the coming years – at least one, and usually at least three. Be realistic, it’s better to exceed expectations than underperform;
• Balance sheet. What will the business own – physical assets, such as machinery, or those less easy to quantify, such as data and goodwill, need to be valued and accounted for;
• Sales forecast. You can be as detailed or as vague as you like, but you need to be able to give people an idea of the income you expect to bring in
• Personnel. Who do you need to run the business? Even if you’re planning on being a sole trader, you may need assistance from time to time, and businesses that plan on employing staff must have a plan for their recruitment and management;
• Market report. Don’t expect everyone you come into contact with to be an expert in your sector. Put down in writing what the market is like and again be realistic – all areas are subject to challenges at some point, so it’s much better to point out potential obstacles in advance to help you plan better for the future.

Case study

Mark Milkins’ import/export company has benefitted greatly from the amount of time he spent on his business plan. “I left a shipping company to set up on my own and thought I knew everything I needed about this market,” he says, “but when I went to set up a bank account and get credit facilities, the bank basically said it wasn’t interested unless I had a business plan.”

But the hours Mark spent compiling his plan helped him identify gaps in his knowledge. “I realised I wasn’t an expert on tax, and I didn’t know enough about marketing,” he says. “So I made sure I got that knowledge before I started trading – if I hadn’t done so, I could have got myself into a lot of trouble.”

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